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SEC Rejects Nine Bitcoin ETFs

The Securities and Exchange Commision has rejected the proposals for Bitcoin ETFs from ProShares, Direxion, and GraniteShares.

The three orders, published 8/22/18, came prior to the deadlines set by the SEC’s public-facing approval process.

In all of the rejections, the SEC used the same reasoning for the dismissal of Bitcoin ETFs, namely “…the Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

The three proposed ETFs that were denied were different from past attempts in that they were tied to Bitcoin futures markets, rather than funds that are directly holding the cryptocurrency.

The SEC did however say that investors would be gaining an extra layer of security by using these exchange-based instruments.

“The Commission acknowledges that, compared to trading in unregulated bitcoin spot markets, trading a bitcoin-based ETP on a national securities exchange may provide some additional protection to investors, but the Commission must consider this potential benefit in the broader context of whether the proposal meets each of the applicable requirements of the Exchange Act,”.